Earnings Presentation
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I would like to present FUJIFILM Holdings’ financial results for the third quarter of the fiscal year ending March 2020. 1 Let me explain the main points of the third quarter of the fiscal year ending March 2020. In the third quarter of the fiscal year ending March 2020, operating income decreased year-on-year by 4.2%. On a constant-currency basis, it increased by 2.9%. Net income attributable to FUJIFILM Holdings increased by 19.4% year-on-year, proceeding as planned for achieving the full-year ROE target of 8%. The total revenue decreased due to a negative impact from the strong yen, the economic slowdown in China, and a decrease in demand after the consumption tax increase. While sales declined in the imaging and document business, healthcare expanded sales, driven by the medical systems, bio CDMO and regenerative medicine business. The operating income increased in healthcare and in document with improvements in profitability and a positive impact from structural reforms, though it decreased in the Imaging and Materials. As a special note, last December, we announced the acquisition of the Hitachi’s Diagnostic Imaging-related Business. The completion of the acquisition is planned in July, subject to customary closing conditions and regulatory approvals. In January this year, we also announced that Fuji Xerox would change its corporate name to FUJIFILM Business Innovation Corp. on Apr. 1, 2021. As for the share buyback as of up to 50 billion yen, 18.8 billion yen was bought back as of the end of January. 2 Let’s move on to detailed performance information for the third quarter of the fiscal year ending March 2020. Consolidated revenue totaled ¥1,728.4 billion, down 4.0% from the previous fiscal year. Operating income totaled ¥151.6 billion, down 4.2% from the previous fiscal year . Income before income taxes came to ¥166.5 billion, up 7.7% from the previous fiscal year due to such factors as the large gains on equity securities. Net income attributable to FUJIFILM Holdings totaled ¥120.7 billion, up 19.4% from the previous fiscal year. 3 Let’s move on to segment specific information. The Imaging Solutions segment recorded revenue of ¥266.1 billion, down 12.4% year-on-year, due to such factors as decreased sales of photographic paper, instant photo systems and digital cameras. Operating income totaled ¥27.4 billion, down 42.8% from the previous fiscal year. The Healthcare & Material Solutions segment recorded revenue of ¥741.2 billion, down 2.3% year-on-year, due to such factors as a declined demand for printing plates in the graphic systems business and continued production adjustments by LCD panel manufactures in the display material business. Operating income totaled ¥70.8 billion, up 1.1% from the previous fiscal year. Within the Healthcare & Material Solutions segment, the healthcare business recorded revenue of ¥350.8 billion, up 2.3% year-on-year, due to a growth in the medical systems, bio CDMO and regenerative medicine business. Operating income totaled ¥20.0 billion, up 14.2% from the previous fiscal year. The Document Solutions segment recorded revenue of ¥721.1 billion, down 2.3% year-on-year, mainly due to a decrease in export to the U.S. and Europe and decreased sales in China. Operating income totaled ¥80.5 billion, up 20.3% year-on-year with improved profitability and a positive impact from structural reforms. 4 First, I would like to present the results of our Imaging Solutions segment. In the photo imaging business, revenue decreased due to such factors as declined sales of photographic paper and inventory adjustments of instant photo systems at some U.S. retailers in the first half of the fiscal year. In instant business, the sales was affected by a decrease in demand after the consumption tax increase in Japan. In the U.S. and Europe, though sell-in decreased to adjust market inventory in Q3, sell-through at main retailers increased during the year-end shopping season including Xmas compared to the previous year. We are aiming to expand sales mainly with attractive new products such as instax mini LiPlay and instax mini Link, a printer for smartphones. In the electronic imaging business, revenue decreased from the previous fiscal year mainly due to a decline in the sales of entry-level mirrorless digital cameras under severe market conditions. The sales were solid for FUJIFILM GFX100, a mirrorless digital camera equipped with a large format sensor with the world’s highest 102 million pixels resolution, and FUJIFILM X-Pro3, a flagship model of the X series launched in November 2019. We are aiming to expand sales of new products such as FUJIFILM X-T200 to be launched this month. In the optical device business, revenue decreased, reflecting a declined demand for various industrial use lenses such as on-vehicle lenses due to the economic slowdown in China. Fujifilm is enhancing a line-up of new products for business growth, such as FUJIFILM PROJECTOR Z5000, which combined optical technologies of FUJINON Lenses, and 4K Premier series, the world’s first 4K‐compatible broadcast lens with an AF function to be launched in March 2020. In the Imaging Solutions segment, though revenue decreased compared to the previous fiscal year, and operating income also decreased compared to the previous fiscal year due to such factors as a decline in revenue and effect of exchange rate, we will enhance the sales further by providing products with competitive advantages utilizing our unique technologies, and by running effective promotions to achieve a performance target. 5 Next is our Healthcare & Material Solutions segment. In the healthcare business field, the medical systems business enjoyed brisk sales in such areas as medical IT, endoscopes and in-vitro diagnostics (IVD). In the bio CDMO business, the contract process development and manufacturing business for biopharmaceuticals increased by the consolidation of Biogen’s manufacturing subsidiary and enhancement of capacity. In the regenerative medicine business, revenue increased due to strong sales of culture media by FUJIFILM Irvine Scientific. As for the highly functional materials business field, in the display materials business, although overall revenue decreased mainly due to production adjustments of LCD panels, the sales of new products related to OLED etc. showed steady growth. In the electronic materials business, though the sales of advanced peripheral materials related to photolithography were affected by market conditions, revenue remained at the same level as the previous fiscal year with solid sales of products such as color resist for image sensors. In the recording media business, sales increased for magnetic tapes for high volume data storage such as FUJIFILM LTO Ultrium8 Data Cartridge. In the graphic systems business, sales decreased due to a decline in the demand for printing plates. In inkjet business, sales decreased mainly in industrial inkjet printhead business effected by the economic slowdown in China. In the Healthcare & Material Solutions segment, though overall revenue decreased, sales increased in the medical systems, bio CDMO and regenerative medicine business. Operating income increased primarily by improvements of profitability in healthcare. 6 Lastly, I would like to talk about the Document Solutions segment. First, in the office products field within the office products and printers business, although the export to the U.S. and Europe and sales in China decreased, sales were strong for the ApeosPort-VII C series, flagship color multifunction devices that realize robust security environment in Japan. In the production services business, overall sales volume increased. Strong sales continued in Japan and the export to the U.S. and Europe for the Iridesse™ Production Press, an on- demand color production printer. In the solutions and services business, revenue increased due to expanded sales of one-stop services that support the design, introduction, maintenance and management of IT environments in offices in Japan. Fuji Xerox aims for further growth in the service field by continuously providing services that support customers in improvements of work efficiency and productivity. Though revenue in the Document Solutions segment declined due to such factors as a decline in the export to the U.S. and Europe and weakened business confidence in China, operating income increased by such factors as improvements in profitability and a positive impact from structural reforms. We will continue our efforts to expand growth areas such as the solutions and services business and the production services business, while enhancing profitability by promoting structural reforms. 7 Next, let’s look at our balance sheet. Assets as of the end of December 2019 totaled ¥3,450.9 billion, increased by ¥36.2 billion from the end of March 2019. Liabilities increased by ¥185.7 billion to ¥1,355.5 billion, mainly due to an increase in a corporate bond and long-term debt, and shareholders’ equity increased by ¥18.9 billion to total ¥2,055.9 billion. The current ratio was 197.5%, decreased by 49.0 percentage points from the end of previous fiscal year. Our debt-equity ratio increased by 8.5 percentage points to 65.9%, and our shareholders’ equity ratio decreased by 0.1 percentage points to 59.6%. 8 Next, with regards to our cash-flow, net cash provided by operating activities totaled ¥162.4 billion, increased by ¥18.8 billion year-on-year due to a decrease in notes and accounts receivable and other factors. Net cash used in investing activities amounted to ¥202.4 billion, mainly due to such factors as acquisitions of businesses. As a result, free cash flow without acquisitions of businesses and others was ¥69.6 billion. 9 Let me talk about the progress in structural reforms at Fuji Xerox.